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'Great Australian Dream' fading as apartment ownership rises

The dream of owning a house is fading for many Sydneysiders. Photo: Rob Homer

Anja Leszinksy's budget of $420,000 would buy two houses in Chicago or three in Dallas. In Sydney, the most unaffordable housing market in the English-speaking world, it gets her a nondescript one-bedroom apartment about 6.4 kilometres from the CBD or a run-down home on the city's outskirts.

She's opting for proximity to the city.

People are time-poor now. Apartments allow them to access the lifestyle, the infrastructure that's all already there close to the city.

“I knew properties were expensive, but I'm getting disappointed because they all seem to sell for a lot more than the price indication,” said Leszinksy, a 25-year-old medical device sales representative who's seen about 18 apartments since September and is still searching. “I want to be close to the city. The size of the place is less important.”

Harold Park ... what the Mirvac apartments will look like.

Apartment ownership is on the rise as the Great Australian Dream of a house in the suburbs fades for buyers priced out of the market. Apartments and townhouses accounted for 35 per cent of new housing construction in the three months ended in September 30, compared with 29 per cent five years earlier and 21 per cent 20 years ago, according to the federal statistics bureau.

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About 13.7 per cent of Australians lived in their own apartments and townhouses according to the 2011 census, compared with 12.4 per cent in 2006.

The shift is giving a boost to multifamily-property developers. Apartment prices rose 0.5 per cent in 2012, compared with a 0.5 per cent decline for houses, according to research firm RP Data.

Apartments focus

Leighton Properties, the real estate arm of Leighton Holdings (LEI), is now focused almost entirely on apartments. Its property division reported a loss that narrowed to $17 million in the six months ended June 30 from $80 million a year earlier.

Stockland (SGP), the nation's biggest listed housing developer, had a 35 per cent drop in profit in the year ended June 30, and last month forecast an earnings decline of as much as 15 per cent in fiscal year 2013, citing sluggish housing conditions. The company said in 2010 it would exit its apartments business.

Stockland shares fell 4.9 per cent in the two years through January 14, compared with a 21 per cent jump in shares of Mirvac Group, whose profit more than doubled in the year to June 30. While Mirvac (MGR)'s mix of units and detached houses fluctuates, the company is building one of Sydney's biggest apartment projects.

“When you look at the future of residential living in Australia, apartments will be a big component of it,” said John Kim, head of Australian property research at CLSA Asia-Pacific Markets. Developers of only detached houses “would have to seriously consider getting into apartments.”

Apartment affordability

Economists have said a shortage of homes helped Australia avoid a US-style crash and keeps prices high, though findings from the 2011 census point to a smaller shortage than initially thought. The country had 7.8 million households in 2011, compared with estimates of about 8.9 million used by the National Housing Supply Council to forecast a shortfall of about 369,000 homes by 2016.

In the US, Sydney apartment buyer Leszinsky's budget of $420,000 would allow her to buy more than two homes in Chicago, where the median price is $152,775, or more than three in Dallas-Fort Worth, which has a median home price of $126,800. That compares with Sydney's median dwelling price of $580,246 as of December 31.

To find a Sydney suburb within Leszinsky's price range a buyer would have to look at least 25 kilometres west of the city centre in Merrylands West, Old Guildford or Villawood, figures from researcher Australian Property Monitors show.

Harold Park

Mirvac is building the $1 billion Harold Park project in Glebe. About 35 per cent of the site will be set aside as parkland, said John Carfi, Mirvac's chief executive for apartments and commercial properties.

Adjacent to the Jubilee Park light-rail station, it includes 1250 townhouses and apartments, starting at $499,000 for a studio apartment to more than $1.8 million for a townhouse. The first stage is expected to be completed in mid- 2014, according to Mirvac.

“People are time-poor now,” Carfi said. “Apartments allow them to access the lifestyle, the infrastructure that's all already there close to the city.”

Buyer demand is strongest for new inner-city, low-rise apartments and townhouses, and is expected to strengthen for high-rise apartments in city centres and inner-ring suburbs in the next 12 months, an October survey of residential property investors, developers and brokers by National Australia Bank found.

New Apartments

The number of apartments and townhouses started in the past five years has climbed 22 per cent, while housing starts have fallen 19 percent, statistics bureau data show. Approvals for apartments and renovations jumped 10.1 per cent in November from the previous month, while permits for private houses dropped 0.3 per cent, according to government figures.

“Cities are growing, so as they grow, it's more difficult to get cottages in the right places,” Triguboff said in an interview in Sydney. “So apartments will keep growing. And there will be more, others, who'll want to build them.”

240 comments

Hmm.. we built a 4br house with double garage, a garden, etc, in a revitalised suburb near Campbelltown - 55 minutes from Central on the train - for exactly $420,000. Hardly run down!

I think I'd rather that than a shoebox closer to the city, where the commute won't necessarily be much quicker.

Then again, the person in the article is 25 - I'm not sure I would've wanted to move that far out at that age (early 30s now), so to each their own.

Commenter

M

Location

Sydney

Date and time

January 15, 2013, 9:51AM

The article is about property IN sydney.

Commenter

Crazy

Location

town

Date and time

January 15, 2013, 10:27AM

That is a 2 hour round trip, how much commuting is that in a year?

Commenter

N

Location

Sydney

Date and time

January 15, 2013, 10:30AM

Campbelltown may be 55 minutes by the cityrail timetable, but you're not counting the drive to the station, finding a park, the infrequency of express train services (maybe half hourly?). All up its 90 minutes each way, more likely 110. You probably still have to be a 2 car family, as well as paying train fares.It is cheaper and roomier out there, but time also has a value.

Commenter

Rob

Date and time

January 15, 2013, 10:52AM

I use to live in Mount Annan ( 5 min west of Campbelltown, and Queenscliff (north Manly). I took longer to get to to the top of Martin Place from Queenscliff.

Surely Queenscliff is not to far to live is it?

Commenter

Investor Pete

Location

Lennox Head

Date and time

January 15, 2013, 11:20AM

Anja, Sydney is hideously expensive and grossly overrated (as you may have already noted). I lived there for 10 years and have since repatriated to the USA. Property values in Sydney (indeed Australia-wide) are trending down. Why buy in a declining market? Your best bet is to continue renting and pocket the difference. You will never match your buying power in Sydney to that of Chicago. Never. Not to mention, the up-front transaction costs of buying that $420k apartment (if you can find it) will cost you $15-$20k. The NSW gov't really wants your deposit for their tax revenues. All the costs the seller usually covers in the US are covered by YOU. That is, the buyer bears nearly all the cost burden. Except agent fees...which is still indirectly covered by the buyer via price inflation.

I promise, in 5 years you will ask "why didn't someone tell me that Sydney was such a hole?" I'm telling you now. Enjoy Sydney for a few years, save your money and repatriate it to the USA while the AUD exchange rate is strong, then get out.

Commenter

Jimmy

Location

Not_Oz

Date and time

January 15, 2013, 11:29AM

@MI lived in campbelltown for 30 years and let me tell you its not 55minutes much to popular believe. Living in bradbury and travelling to St VIncents hospital darlinghurst on a good day was 2 hours each way. Thats 4 hours a day, lets think beyond time tables and look at door to door. Further to another guys comment you need a car as buses only come every half hour and take about 20minutes to arrive at the station. Lets get real hey...

Commenter

Mark

Date and time

January 15, 2013, 11:37AM

I live 9kms from the CBD, my door to door commute takes 25-30mins max, and the bus ride itself is about 10-15mins. With a 55min train ride from campbelltown you're probably looking realistically at a 1:15min commute at least when you factor in driving, walking, parking, etc. Thats 2:30hrs per day or 1:30 more then me.

Over the course of a year that amounts to 390 extra hours of commuting or over 16 days of the year spent commuting. And if you consider that your probably only awake 16 hours of the day thats 24 days of the year that your awake gone.

I dont know about you but i dont particularly want to waste almost an entire month of every year of my life commuting to and from work! Your big house might be nicer then a shoe box, but at least you'd get to spend an extra month of the year in your shoe box without the commute.

Commenter

SimonSydney

Location

Sydney

Date and time

January 15, 2013, 11:39AM

@Crazy The fact that you don't consider Campbelltown to be IN Sydney makes your knowledge questionable. Yes it's on the outskirts, but it's still IN Sydney.

Commenter

kat_

Date and time

January 15, 2013, 11:42AM

I've sat in buses in traffic jams from the west side of Glebe to the CBD, taken longer than a train from Campbelltown.